Opinion
Docket No. 71612.
Decided September 18, 1984.
Irving D. Robinson, for appellants.
Darden, Neef Heitsch (by Lawrence D. Heitsch), for appellee, Melvin W. Frederick.
David Sherman and Kathleen Lee Lange, heirs at law of Mary Jane Baird, appeal as of right from a May 4, 1983, order of the Macomb County Probate Court, allowing appellee Melvin W. Frederick, former personal representative of the estate, $49,375 in compensation for services rendered to the estate.
Mary Jane Baird died intestate in April of 1981, leaving a spouse, David Sherman, and three adult children by a previous marriage, as heirs at law. The main assets of the estate were a bar known as the "Three Star Lounge", the marital home, and some rental property. On April 28, 1981, Melvin Frederick was appointed personal representative of the estate and soon began managing the Three Star Lounge.
Mr. Frederick was discharged as personal representative on December 22, 1982, because of poor health; successor co-representatives were appointed. On March 16, 1983, Frederick filed a petition for allowance of his second and final account, in which he requested a reasonable fee for his services.
At a hearing on May 4, 1982, Frederick requested a fee of $85,000, to which appellant Sherman objected. Frederick then testified that he managed the bar from May 1, 1981, until December 21, 1982. He did not keep an account of his hours, but estimated that he spent 5,700 hours managing the bar. His services did not include either bartending or accounting and he admitted never having had any previous experience in managing a bar. The only other witness at the hearing was James Rosa, a creditor of the estate and a former bar owner. He felt that a manager for a bar could be hired for $250 per week and that the person hired would also act as a bartender, eliminating the need to pay the salary of an additional employee. During Frederick's tenure as personal representative, the bar realized a net profit of $17,279. This calculation of profit does not allow for payment to Frederick for his services.
At the conclusion of the hearing, the court allowed Mr. Frederick $2,500 per month for his 19-3/4 months of service to the estate, totalling $49,375. The sole issue on appeal is whether the trial court abused its discretion in determining the amount of just and reasonable compensation for the personal representative. We hold that it did.
Compensation of personal representatives is governed by § 541 of the Revised Probate Code, MCL 700.541; MSA 27.5541, which states, in part:
"A fiduciary shall be allowed the amount of his or her reasonable expenses incurred in the administration of the estate and shall also have such compensation for his or her services, both ordinary and extraordinary, as the court in which the fiduciary's accounts are settled deems to be just and reasonable."
Section 541 of the Revised Probate Code has not yet been the subject of a detailed interpretation in the published opinions of Michigan's appellate courts. This Court has indicated that § 541 imposes the same standard of just and reasonable compensation for fiduciaries as did its predecessor provision, MCL 704.33; MSA 27.3178(284). In re Brack Estate, 121 Mich. App. 585, 590-591; 329 N.W.2d 432 (1982). Section 541 did not alter Michigan law concerning the determination of just and reasonable compensation for a fiduciary who renders services to an estate.
We also note § 541's similarity to § 3-719 of the Uniform Probate Code, which also states that a "personal representative is entitled to reasonable compensation for his services". Judicial interpretations of similar statutory provisions from other jurisdictions may also prove helpful in interpreting § 541.
This Court will not reverse a probate court's decision setting a personal representative's compensation absent an abuse of discretion. See In re Finn's Estate, 281 Mich. 478, 484; 275 N.W. 215 (1937); In re Ach Estate, 7 Mich. App. 228, 230; 151 N.W.2d 363 (1967).
The burden of proof is on the person claiming compensation. In re Eddy Estate, 354 Mich. 334, 348; 92 N.W.2d 458 (1958). The claimant must satisfy the court that the services rendered were necessary and that the charges therefor are reasonable. In re Grover's Estate, 233 Mich. 467, 476; 206 N.W. 988 (1926); see also In the Matter of Estes Estate, 134 Ariz. 70; 654 P.2d 4 (1982); In the Matter of Painter Estate, 39 Colo. App. 506; 567 P.2d 820 (1977). A claimant's failure to present records concerning his services is usually weighed against him. See Grover's Estate, supra, p 476; see also In re Kiebler Estate, 131 Mich. App. 441, 444; 345 N.W.2d 713 (1984).
PCR 707.1(d)(2) governs the contents of accountings by a personal representative. It states, "[a] written description of services performed must be included or appended regarding compensation sought by a fiduciary". We note that Frederick's request for a reasonable fee for his services did not comply with this provision.
In determining compensation for the services of a personal representative, the court must determine the reasonable value of the services performed. Effort expended may be an indicator of value, but cannot be considered dispositive. In Becht v Miller, 279 Mich. 629, 636-637; 273 N.W. 294 (1937), the Supreme Court substantially reduced a fee awarded to an attorney who had represented the estate. In that case, attorney Lamb submitted a claim for compensation for 1,400 hours of work in addition to 26 days in court. The Court, noting that Lamb had undoubtedly expended considerable time and effort, nonetheless reduced his fee from $7,500 to $2,000. It conducted its own review of the evidence to determine what work was necessary and fixed compensation at its estimate of the value of the work. In doing so, it disregarded the expert testimony of attorneys who had estimated value based on the number of hours allegedly worked by the attorney. Becht, supra, p 641. Evidence establishing the value of services is insufficient to support a claim if the need for the services has not been proven.
In this case, Frederick testified that he spent 12 hours a day at the bar, but did not show what services he performed during that period each day. He did none of the actual bartending and hired an accountant to do the books. Frederick offered no documentation concerning the services he actually performed or the time required to perform them. Most importantly, the probate court did not require sufficient evidence of the value of the services performed. It is the value of the services required which is determinative. Time spent is only one indicator of value and may be a poor one where, as here, a fiduciary's conduct is challenged as commercially unreasonable. See Becht, supra. Although a fiduciary is ordinarily entitled to just compensation for his efforts, such compensation must also be reasonable to the estate.
Independent of his management of the bar, nothing in the record indicates what services Frederick was required to perform as personal representative. Absent proof of the necessary services performed and their value, no compensation may be awarded.
We find that it was an abuse of discretion to allow appellee Frederick's claim for compensation without adequate evidence of the value of the services he performed for the estate. We reverse the probate court order allowing the claim for compensation and remand for an evidentiary hearing for a determination of just and reasonable compensation.
Reversed and remanded.